Business

Organizations
AC 122
Week 4
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Classes of Corporations;
Corporators and incorporators,
stockholders and members;
Classification of shares:
Week 4

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 Classes of Corporations
◺ Publicly Held Corporation:
◺ Closely Held Corporation
◺ Limited Liability Company:
◺ C Corporation
◺ S Corporation
◺ Professional Corporation
◺ Non Profit Corporation

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* Students to provide examples and discuss
 Classes of Corporations
Publicly Held Corporation:

The establishment most often referred by the word

corporation is a publicly held corporation. A publicly
held corporation is a publicly traded corporation. The
shares of such corporations are traded on a public stock
exchange (e.g., the New York Stock Exchange or NASDAQ
in the United States).
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* Students to provide examples and discuss
Classes of Corporations
Publicly Held Corporation Examples:
NAME TICKER CATEGORY First Gen Corporation FGEN Power

Aboitiz Equity Ventures, Globe Telecom, Inc. GLO Telecommunications

AEV Holdings
Inc.
GT Capital Holdings,
Aboitiz Power Corp. AP Power GTCAP Holdings
Inc.
Alliance Global Group, International Container
AGI Holdings ICT Logistics
Inc. Terminal Services, Inc.
Ayala Corporation AC Holdings
JG Summit Holdings,
JGS Holdings
Ayala Land, Inc. ALI Real estate Inc.

Bank of the Philippine Jollibee Foods

BPI Bank JFC Food and Beverage
Islands Corporation
LT Group, Inc. LTG Holdings
BDO Unibank, Inc. BDO Bank
Manila Electric
MER Power
Bloomberry Resorts Company
BLOOM Holdings
Corporation Megaworld Corporation MEG Real estate
DMCI Holdings, Inc. DMC Real estate Metro Pacific
Investments MPI Holdings
Emperador Inc. EMP Food and Beverage Corporation
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Classes of Corporations
Closely Held Corporation:

A closely held corporation is a corporation that has only a small

number of stockholders with no public market for its stock.

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Classes of Corporations
Limited Liability Company:
◺ Unlike a corporation, an LLC is a pass-through type of
business. Pass-through businesses are those in which the profits
and losses of the business pass through to the owners. In other
words, the business income is considered as the owner’s income, and
the owner pays the tax on his or her personal tax return.
◺ Although the Philippines does not adopt the legal concept of
Limited Liability Company (LLC) or Private Limited Company (PLC), a
Domestic corporation serves as its closest local equivalent by
the Corporation Code of the Philippines.
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Classes of Corporations (Domestic Corp)
Limited Liability Company:
◺A domestic corporation serves as its closest local equivalent by the Corporation Code of the
Philippines.
◺ Organizational Structure
◺ 2 to 15 directors or incorporators who shall be mentioned in the Articles of
Incorporation, each of whom must hold at least one share of the capital stock
◺ A majority of the incorporators must be residents of the Philippines, but not necessarily
citizens
◺ For a foreign corporation to be granted a license to operate in the Philippines as a
business entity, it is required to appoint one (1) resident agent who shall accept all
summons or legal processes served, arising out of any business or transaction which
occurred in the Philippines, to the corporation

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Classes of Corporations (Domestic Corp)
Every corporation in the Philippines also requires at least 4 officers: President, Corporate Secretary,
Treasurer, Compliance Officer

Out of these three, only the Corporate Secretary must be a citizen of the Philippines. The Treasurer must
be a resident in the Philippines. The President can also be a non-resident; however, the President must
be a director as well as hold at least one share.
Shareholder Director Citizen Resident

President ✓ ✓

Corporate ✓ ✓
Secretary

Treasurer ✓

Compliance
Officer
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Classes of Corporations
C Corporation:

A “C Corporation” is a business entity that can have an

unlimited number of shareholders, which may include
shareholders who are foreign citizens. Shareholders are
protected from the corporation’s liabilities. The corporation is
taxed on its profits, and shareholders are also taxed on the
distributions they receive, such as profit sharing payments or
dividends.
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Classes of Corporations
Expectations for C Corporation:
◺ At least one meeting per year for both shareholders and
directors
◺ Records of meetings must be maintained to clearly show how
the business runs
◺ Records must be kept of the voting for the company's directors
◺ List of owner's names and percentages of ownership must be
kept
◺ Company bylaws kept on the property of initial business location

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Classes of Corporations
S Corporation:

◺ Unlike a “C Corporation”, an “S Corporation” must not have more than 100

shareholders and must have only one class of stock. Spouses are automatically
treated as a single shareholder.
◺ Shareholders must be U.S. citizens or residents, and must be natural persons, so
corporate shareholders and partnerships are generally excluded. However,
certain trusts, estates, and tax-exempt corporations, are permitted to be
shareholders.
◺ Profits and losses must be allocated to shareholders proportionately to each
one’s interest in the business.
◺ An S corporation cannot be owned by a C Corporation, LLC, partnership, or
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another S corporation
Classes of Corporations
Professional Corporation:

◺ A professional corporation is a corporation consisting of professionals who

are licensed to practice a particular profession such as accountants, lawyers
and doctors.
◺ These professionals can form a corporation and take advantage of the
various benefits of the corporate structure such as limited liability of
shareholders, continuity of life and centralized management.
◺ However, shares in a professional corporation can only be transferred to
other individuals licensed to practice in the same profession.

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Classes of Corporations
Non Profit Corporation:

◺ A nonprofit corporation is an organization formed for serving a

purpose of public other than for accumulation of profits. These
corporations enjoy tax-exempt status; however, specific
requirements and limitations are imposed on their activities.
◺ Non Profit corporations are generally those that serve a
scientific, literary, education, artistic or charitable purpose that
benefits the public.
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 Classes of Corporations (recap)
◺ Publicly Held Corporation:
◺ Closely Held Corporation
◺ Limited Liability Company:
◺ C Corporation
◺ S Corporation
◺ Professional Corporation
◺ Non Profit Corporation

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* Students to provide examples and discuss
 Business Organizations
◺ Classes of Corporations;
◺ Corporators and incorporators, stockholders and
members;
◺ Classification of shares:

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* Students to provide examples and discuss
Corporators and incorporators, stockholders and members;

◺ Corporators are those who compose a

corporation, whether as stockholders or as
members.
◺ They are called stockholders or shareholders.
◺ Corporators in a non-stock corporation are
called members

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Corporators and incorporators, stockholders and members;

Incorporator
◺ An incorporator is the person in charge of setting up
a corporation and registering it with the state.
◺ They're responsible for filing the paperwork and
signing the articles of incorporation.
◺ A business is not fully incorporated and legally
registered without an incorporator.
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 Corporators and incorporators, stockholders and members;

Incorporator Duties and Responsibilities

◺ Signs and files the articles of incorporation
◺ Selecting members for the board of directors

◺ Organizing an initial meeting of the board

◺ Adopting the corporation's by-laws

◺ Authorize to sign documents

◺ *Hire an attorney or other expert to serve as the incorporator as extra reassurance

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* Students to provide examples and discuss
Corporators and incorporators, stockholders and members;

Stockholder and Members

◺ When an individual's name is included in the formation
documents for an LLC, they are considered a member of
that business.
◺ If the business includes a register of members in their
official documents, all of the names entered are
members.
◺ Membership registers also include any investors in the
business, or anyone who owns shares. 20
 Business Organizations
◺ Classes of Corporations;
◺ Corporators and incorporators, stockholders and
members;
◺ Classification of shares:

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* Students to provide examples and discuss
Classification of Shares

• Non-voting shares
• Par Value
• No-Par Value
• Preferred shares
• Founders’ shares
• Redeemable shares
• Treasury shares
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Classification of Shares

Non-voting shares
• Certain shares may be deprived of voting rights, provided
that there shall always be a class or series of shares with
complete voting rights.
• It do not give the holder any voting rights in the company.
• This means that the holder is entitled to a portion of the
company's capital, but is not able to take part in its general
meetings.
• Non-voting shares are mostly issued to employees or to
family members of the main shareholders. 23
Classification of Shares

Par Value
• The par value, or face value, is the stated value per share.
• A par value for a stock is its per-share value assigned by the
company that issues it and is often set at a very low amount
such as one cent.
• For example, if company XYZ issues 1,000 shares of stock with
a par value of $50, then the minimum amount of equity that
should be generated by the sale of those shares is $50,000.

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Classification of Shares

No-Par Value
◺ This "no-par" status means that the company has not
assigned a minimum value to its stock.
◺ The only financial effect of a no-par value issuance is
that any equity funding generated by the sale of no-
par value stock is credited to the common
stock account.
◺ No-par value shares must be issued for a consideration
of at least Five pesos (P5) per share (in the Phils.) 25
Classification of Shares
Preferred shares
• Preference shares, more commonly referred to as preferred stock, are
shares of a company’s stock with dividends that are paid out to shareholders
before common stock dividends are issued.
• Preferred shares of stock issued by a corporation may be given preference in
the distribution of dividends and in the distribution of corporate assets in
case of liquidation, or such other preferences.
• Preferred shares must always be issued with a stated par value.
• The board of directors may fix the terms and conditions of preferred shares
of stock

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Classification of Shares
Founders’ shares
• Founders stock means the shares of common stock that are issued in the
organizational minutes or consent of the board of directors of the company
when they are setting up the new business, adopting bylaws and appointing
officers.
• Founders’ shares may be given certain rights and privileges not enjoyed by
the owners of other stocks. Where the exclusive right to vote and be voted
for in the election of directors is granted, it must be for a limited period not
to exceed five (5) years from the date of incorporation:

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Classification of Shares

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Classification of Shares
Redeemable Shares
• They are shares which may be purchased by the corporation from the
holders of such shares upon the expiration of a fixed period, regardless of
the existence of unrestricted retained earnings in the books of the
corporation.
• Redeemable shares can be "bought back" by the issuing company at a
predetermined price and at or after a predetermined time.
• They are often issued by employers as part of a compensation package to
entice new employees. (in some countries/companies)

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Classification of Shares

Treasury shares
• Treasury shares are shares of stock which have been issued
and fully paid for, but subsequently reacquired by the
issuing corporation through purchase, redemption, donation,
or some other lawful means.
• Treasury stock, also known as treasury shares or reacquired
stock refers to previously outstanding stock that is “bought
back” from stockholders by the issuing company.

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Classification of Shares (recap)

• Non-voting shares
• Par Value
• No-Par Value
• Preferred shares
• Founders’ shares
• Redeemable shares
• Treasury shares
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 Business Organizations
◺ Classes of Corporations;
◺ Corporators and incorporators, stockholders and
members;
◺ Classification of shares:

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* Students to provide examples and discuss